Experts propose policy changes to save Nairafrom OKORO CHINEDU in Lagos, Nigeria
LAGOS, (CAJ News) – ANALYSTS have called for a change of the Central Bank of Nigeria’s foreign currency policies as the bank appears to be losing its battle to retain the local currency’s competitiveness against major currencies.
The calls come amid the postponement of the general election to 28 March, which sent the interbank foreign exchange market into a tailspin this week.
The beleaguered Naira subsequently breached US$1/N200 in intraday trade on Tuesday, brushing off the CBN’s attempts to stop the pace of depreciation “The naira’s steep ascent against the US dollar has brought into question the central bank’s foreign exchange policy,” an analyst told this publication.
He however was sceptical there could be any policy changes in the coming weeks.
“The adoption of a new exchange rate regime by the CBN at its next sitting in March might be deemed inappropriate given that it is less than a week before the general elections.”
The elections in Africa’s biggest economy and leading oil producer were initially scheduled for this coming weekend but had to be rescheduled owing to security concerns.
Meanwhile, another market watcher said the central bank’s repeated currency interventions had proved futile, demanding more strenuous measures.
Though reluctant to allow the naira to break key resistance levels, the CBN has been less assertive of late, perhaps signalling its intention to preserve the level of its international reserves at the expense of the
currency,” he said.
Rand Merchant Bank said as it asserted in November 2014, monetary policy will have to be more of a disciplining factor to assist rebalancing since it was unlikely that fiscal policy would be significantly restrained.
“The stark dislocation between the official and interbank rates, as well as the considerable drop in daily trading volumes are merely reminders of the intense liquidity squeeze stifling the interbank market.
“”Sustained capital flight and the potential removal of Nigerian benchmark bonds from the GBI-EM have aggravated depreciatory pressures, destabilising an already worn local currency,” RMB stated.
– CAJ News
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